From the style of new-to-work army trousers to the oversupplied appearance of last season, the COVID-19 pandemic is a fashion disaster for one of the world’s largest industries.
The first ripples of the problem are already visible. Army & Navy are closing department store chains after more than a century in business, Canadian Reitmans have warned it could fail without financial assistance, and international chains such as J. Crew, Neiman Marcus and Aldo all filed for bankruptcy protection.
But retail is just the end of an industry that extends to fashion designers, clothing manufacturers, textile producers and even agricultural operations, said Lori Moran, a recently retired University of Alberta professor who is the assistant chair of the human ecology department.
“This industry really faces dire consequences, not only for retailers but for everyone who produces products sold by fashion retailers,” Moran told CBC Radio. Edmonton AM this week.
“There are millions of workers who don’t have jobs, factories that won’t open. There are huge losses that occur in one of the biggest industries in the world. And fashion retail is really only part of it.”
Retailers feel it first
But retail is the first domino in the industrial chain; it sent someone else down.
The April coronavirus update from The State of Fashion 2020, an analysis by consulting firm McKinsey & Company, warns that about 80 percent of publicly listed fashion companies in Europe and North America will be in financial trouble if stores remain closed for two months.
The industry generated $ 2.5 trillion in annual global income before the pandemic struck, McKinsey & Company noted, but has already declined and is preparing for a difficult 2020.
“Many Canadian retailers were already in trouble before COVID reached,” Moran said, citing intense competition and a drop in traffic at several major department stores. “The COVID crisis really made things worse for some of these companies.”
With most of the Canadian pandemic-related closure beginning in mid-March, the industry is now reaching the two-month mark.
Heading package retailers in financial danger are those who don’t – or still don’t – have the ability to make sales through e-commerce, Moran said.
“If a company doesn’t have an online business that has stood up to try and compensate for some of the lost businesses, they are in trouble. So, you might see some companies struggling to make it happen,” he said.
Indeed, there has been a surge in business for Ottawa-based Shopify, which created an e-commerce platform for businesses. Last week, Shopify surpassed Royal Bank of Canada as the most valuable company in the country.
Too much supply, not enough demand
The essence of the issue of fashion goes down to the classical economic principle of supply and demand.
“We see people changing their habits a little in terms of demand,” Moran said. “We’ve been working at home for longer. Obviously there is a trend for more comfortable clothing – so change work clothes for sweatpants, maybe even pajamas in some cases.”
Moran suggested that companies that sell “athleisure” clothing, such as Vancouver-based Lululemon, might still be fine.
In March, Lululemon cited the uncertainty of COVID-19 in his refusal to offer financial prospects for 2020.
On the supply side, many retailers find themselves in abundant inventory, ordered months in advance, that they are now having trouble selling and, in some cases, saving.
“When times are hard, many retailers are out of price, you know, places like Winner, for example … will take a lot of stock that retailers can’t sell,” Moran said.
“But there is so much now, and there are so many discounts happening everywhere … I don’t think they can absorb everything that’s out there. This will be a big problem.”
Finance also influences our style
This week, Alberta began the first phase of a reopening strategy, which allowed retailers and shopping centers to open doors with much caution and careful rules to enforce physical distance and prevent the spread of new corona viruses.
West Edmonton Mall, for example, will limit crowds to around 30 to 50 percent of normal occupancy.
The mall’s general manager, Danielle Woo, told me Edmonton AM that he hopes to see buyers returning at the weekend. “Everyone needs a little retail therapy after the last few weeks,” he said.
But Moran noted that not everyone is in a financial position to buy shopping trips, no matter how deep the discounts are.
“Fashion is an industry that is very dependent on discretionary spending,” he said.
“Even if there are some good deals out there, when consumers are short of money and they don’t work, fashion shopping is like at the bottom of the list.”
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